Securities law firm Carmel, Milazzo & DiChiara LLP (CMD) is investigating claims against brokerage firm Ameriprise Financial Services, Inc. for recommending unsuitable closed-end funds (CEFs) and for failure to supervise.
In August 2016, Ameriprise Financial Services, Inc. entered into an Acceptance, Waiver and Consent (AWC) with FINRA. According to FINRA, Ameriprise Financial Services, Inc. failed to establish and maintain a system and procedures that were reasonably designed to supervise its registered representatives’ sales of closed-end funds (CEFs) to their customers. The findings stated that despite being aware that CEFs purchased at an initial public offering (IPO) were most suitable for long-term investments, and that the sales charges applied to purchases at the IPO made short-term trading of these CEFs generally unsuitable, Ameriprise Financial Services, Inc. did not have a system and procedures reasonably designed to detect and prevent potentially harmful short-term trading of CEFs.
As a result, Ameriprise Financial Services, Inc. failed to detect and prevent at least one registered representative from engaging in a pattern of unsuitable short-term trading of CEFs purchased at the IPO. The findings also stated that a former registered representative engaged in a pattern of recommending short-term trading of CEFs at the IPO in connection with customer accounts. On two occasions, the registered representative’s activity was flagged by Ameriprise Financial Services, Inc.’s centralized supervision unit (CSU), which was a group of registered principals responsible for reviewing trading and determining discipline. However, on each occasion, no demonstrable action was taken, as the CSU registered principals’ attempts at escalation were not properly acted upon, indicating that the firm was not adequately supervising this type of transaction. The findings also included that a CSU registered principal again flagged the registered representative’s activity, and an investigation of the registered representative’s CEF recommendations was undertaken, which ultimately led to the registered representative’s termination.
FINRA found that Ameriprise Financial Services, Inc. did not utilize any surveillance reports designed to highlight or detect patterns of short-term trading or switching of CEFs. While CSU registered principals generally reviewed CEF IPO transactions, and had the ability to establish filters in their supervisory review tool for purposes of detecting potentially unsuitable patterns, the use of these filters was not required. As a result, Ameriprise Financial Services, Inc. failed to establish, maintain, and enforce a supervisory system and written supervisory procedures reasonably designed to ensure compliance with applicable laws and regulations relating to the suitability of short-term trading of CEFs at the IPO.
If you or someone you know lost money investing with Ameriprise Financial Services, Inc., you may be entitled to recover your investment losses through FINRA arbitration. CMD accepts cases on a contingency fee basis, which means we only get paid if you get paid. Your time to file a claim may be limited, so contact us today at (212) 658-0458 or firstname.lastname@example.org for a free and confidential case evaluation.